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Overview of Southeast Asia’s E-commerce Market

Market size

The number of Internet users in Southeast Asia, and particularly in the 6 largest ASEAN countries, add up to create a large untapped market. There are eleven countries in southeast Asia and 87% of the population of Southeast Asia are in 6 of them, namely Indonesia, Philippines, Vietnam, Thailand, Malaysia and Singapore, together ASEAN. Though the Singaporean e-commerce market is more mature and the Malaysian market is more dynamic, in Indonesia, Thailand, the Philippines and Vietnam, e-commerce is still at a very early stage and remain an important reservoir of growth for ASEAN.

E-commerce in the region has grown by more than 62% CAGR over the past 3 years according to the Google-Temasek e-Conomy SEA 2018 report. The report also estimates that e-commerce will exceed $100 billion in GMV by 2025, from $23 billion in 2018. Despite such astonishing numbers, online commerce remains hugely underpenetrated, at around 2 -3 % of total retail sales. This pales in comparison to around 20% and 10% in China and US respectively. This report confirmed the growing confidence among investors in the region.

And according to the Hootsuite research, Southeast asians spend more time on the mobile Internet than anywhere else in the world. Internet users in Thailand spend 4 hours and 56 minutes every day using the phone—more than in any other country. Indonesian, Filipino, and Malaysian users, who spend around 4 hours every day on mobile internet, are also among the top 10 globally in terms of engagement. By comparison, internet users in the UK and in the US spend just over 2 hours per day on mobile internet, while users in France, Germany, and Japan spend 1 hour and 30 minutes.

Market trend

There is a emergence of experiential e-commerce – discovery, entertainment and social engagement.

At a time when consumers have limitless shopping choices, both offline and online, experiences are the new currency. Consumers want more than just to shop for what they need – they want to discover new products, be entertained, and even engage with the community and friends.

As a result, online shopping in Southeast Asia is becoming an increasingly social, increasingly immersive experience.

Increasingly, e-commerce apps in the region are not simply in-and-out transactional platforms for consumers. Rather, consumers may dip into the app without a prior desire to buy specific items and instead simply browse through products and deals curated by e-commerce platforms. Consumers may also want to chat with sellers to learn more about different products, or catch up on the social feeds of their friends or family.

They may even come to e-commerce apps to consume content. For example, one of Shopee’s most popular new features is an interactive in-app quiz that you can play with family and friends, hosted by celebrities.

As the boundaries between shopping, social and entertainment fade, time spent on apps and the ability to retain the attention of users will likely become more important performance metrics for e-commerce platforms.

Ecommerce platforms

According to foreign media reports, Shopee has become the most visited e-commerce platform in southeast Asia, beating Lazada in the second place and Tokopedia in the third place, with an average of 184.4 million visits on desktop and mobile networks in the first quarter of 2019.

According to the results of a recent study by iPrice Group and App Annie, Shopee’s overall average traffic increased 5%, mainly thanks to increased traffic in Indonesia and Thailand. IPrice said that while Shopee was able to maintain its growth momentum in the previous quarter, the first quarter of 2019 was seen as off-peak.

Meanwhile, Lazada’s overall average traffic fell 12% from the previous quarter, to 179.7 million visitors in the first quarter of 2019. IPrice attributed the decline to a difference in marketing activity between the two quarters. Still, Lazada remains the most visited e-commerce platform in Malaysia, Singapore, the Philippines and Thailand, according to the study.

Meanwhile, Tokopedia, Bukalapak and Vietnam’s Tiki are among the top five most popular e-commerce platforms in southeast Asia, although they sell only in a single market.

Besides Indonesia and Vietnam, the other local e-commerce platform that performed well is Lelong, which ranks third in Malaysia. Argomall ranks fourth in the Philippines; Qoo10 is number one in Singapore; Chilindo is third in Thailand.

Ecommerce shopping apps

When it comes to mobile apps, Lazada is the top choice for consumers in Malaysia, Singapore, Philippines and Thailand, while Tokopedia and Shopee are the most popular apps in Indonesia and Vietnam respectively. For Malaysia in particular, other popular mobile shopping apps are Shopee, taobao, 11street and AliExpress. Meanwhile in Singapore, Qoo10 Singapore, Shopee, taobao and ezbuy are the top five most popular shopping e-commerce applications.

Payment methods

Indonesia is definitely a potential market for mobile payment. Bukalapak, the most popular e-commerce platform in the region, partnered with DANA (supported by ant financial) to launch the BukaDana e-wallet and BukaCicil’s installment payment feature, aiming to provide consumers with a safer and more convenient digital payment experience.

In Malaysia, 50% of consumers are concerned about the security and fraud brought by mobile wallets. But Malaysia already has more than 30 non-bank e-currency issuers, according to the central bank, BNM. Overall, there are some positive prospects for e-payments, such as GrabPay from Singapore, alipay and WeChat payments from China, and local competitors Boost and Touch ‘n Go.

About 80 per cent of thais have bank accounts, but only 5.7 per cent have credit cards. PayPal is by far the most popular method of payment for e-wallets. And for cards, the market is almost dominated by Visa (79%) and MasterCard (20%). Thailand is pushing more industry participants to adopt mobile payments. LINE provides Rabbit LINE Pay, serving an estimated 4.5 million users in Thailand. Garena offers AirPay wallets, as well as TrueMoney wallets. Another cashless method is the national electronic payment program PromptPay.

In the “Cash is king” society of Vietnam, Cash on Delivery is the dominant payment mode. MoMo is growing into Vietnam’s largest mobile wallet provider by building partnerships with a wide range of local players and providing customers with the bonjour experience.

Bank cards is the most popular payment methods in highly developed Singapore. Singapore has concerns about data security and privacy in electronic payments. There is a issue that Singapore’s various financial institutions operate independently and the issuance pattern of bank cards is highly fragmented. About 56 per cent of credit CARDS are planned to be issued by local institutions.

High levels of fraud and cyber attacks in the Philippines have led consumers to be wary of online transactions. Alibaba ant financial, in conjunction with GlobeTelecom, a well-known mobile phone service provider in the Philippines, Mynt, a digital finance company, and Ayala group, a shopping center operator, launched the promotion of GCash “scanning payment” in the Philippines.

Tax Regulations

The image above show the state of ecommerce tax regulations across six major Southeast Asian markets. In Indonesia and Thailand, ecommerce tax is predicted to bolster the growth of social commerce because, unlike marketplaces, they are uncontrolled. Singapore might also see a decrease in cross-border shopping as prices increase with the introduction of Goods and Service Tax (GST) on ecommerce goods and services from overseas. Currently, 89% of all cross-border transactions in the Asia Pacific region are conducted by Singaporeans.

Logistics

The table below shows the latest ratings and country rankings from the World Bank’s 2018 Logistics Performance Index (FPI), an in-depth global analysis that cross-compares dozens of countries to rate and rank their logistics capabilities.

All these countries are currently experiencing rapid urbanization, which typically leads to increased demand for infrastructure and consumer goods. There is definitely significant room for improvement, since the overall infrastructure is still poor.

And logistics companies need to catch up with rising demand and support the flourishing economic activity of each country. Adapting to the fast-changing technology is necessary to deliver efficient solutions, however. Good management of a logistics process requires efficiency and reliability. Therefore, logistics companies need to acquire technology which can streamline the entire supply chain.

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